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Opinion
Mark Buchanan

How High-Speed Traders Are Like Fish

High-frequency traders might actually help regular investors make better decisions.
Photographer: Junko Kimura/Getty Images
Photographer: Junko Kimura/Getty Images

At precisely 4:00:00 p.m. on Dec. 5, closing time for the Nasdaq stock exchange, a company called Ulta Salon Cosmetics & Fragrance announced worse-than-expected earnings. By 4:00:01 p.m., in the one second Nasdaq required to calculate the final stock price, high-speed traders with access to direct news feeds had already knocked it down by about 3 percent.

The case of Ulta demonstrates why timely information is precious, and how trading on it is getting ever faster. Computers process news so quickly that they can move stock prices before exchanges even have time to calculate them. Technology companies promise traders the power to place more than 20,000 orders a second over a single high-speed data link.